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Chrysler to cut up to 12,000 jobs in effort to slash costs

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Dee-Ann Durbin
November 2, 2007
— Chryslerís U.S. hourly workers, worried about job security, barely passed a new four-year contract with the automaker in votes that concluded last weekend. It turns out their fears were well-founded: The company now plans to cut 12,000 jobs.

Chrysler said Thursday it will cut 8,500 to 10,000 hourly jobs and 2,100 salaried jobs through 2008, or about 15 percent of its work force. The cuts come on top of 13,000 Chrysler layoffs that were announced in February.


Some workers felt betrayed by the announcement. In voting that ended Saturday, just 56 percent of Chryslerís U.S. production workers and 51 percent of skilled trades workers approved the new agreement after heavy lobbying by the United Auto Workers union.


"I think we just got sold out by our leadership,ď said Edward Mendrysa, 56, of Southgate, who for the past 13 years has worked on the door line at the Jefferson North plant in Detroit. The plant, which makes the Jeep Grand Cherokee and Jeep Commander sport utility vehicles, is one of five that will have a shift eliminated under the plan.


The UAW said information on upcoming production changes was shared with plants. But the union has little control over job cuts that are related to production volume, and Chrysler cited overproduction and sluggish sales for the cuts.


"Our union will make sure our members receive all of the benefits and protections to which they are entitled under the contract,ď UAW spokeswoman Christine Moroski said.


Chrysler officials said falling demand for vehicles in the U.S. market made the cuts necessary. Chryslerís sales fell 4 percent in the first 10 months of this year, and the company expects slow sales in 2008. Chrysler is cutting four models as part of the plan, including the PT Cruiser convertible.


"We have to move now to adjust the way our company looks and acts to reflect a smaller market,ď Chrysler Vice Chairman and President Tom LaSorda, who led the company through the recent contract talks, said in a statement. "That means a cost base that is right-sized and an appropriate level of plant utilization.ď


Most workers will be offered buyout or early retirement packages. Workers also could be offered jobs at other plants. About 1,100 of the salaried workers affected are temporary workers, who donít get severance packages.


Industry analysts said the cuts were long overdue to avoid overproduction, which leads to high inventories, angry dealers and costly incentives to move cars off dealersí lots. Chrysler, which became a private company in August, is now better equipped to make those changes, since it doesnít report earnings and can afford to take a short-term hit paying for buyouts. The private equity firm Cerberus Capital Management LP became the majority owner of Chrysler after buying an 80.1 percent stake from Chryslerís former partner, German automaker Daimler AG.


Aaron Bragman, an industry analyst for the consulting firm Global Insight, said Chrysler can now make decisions in a matter of hours instead of slogging through months of trans-Atlantic debate. Bragman said Chrysler knew it would have to wait until the contract was ratified to make cuts or else workers would have voted down the contract.


"They now have the ability to adjust production to demand, which is what the Japanese have been doing for years,ď he said.


In addition to Jefferson North, shifts will be cut at vehicle assembly plants in Belvidere, Ill.; Toledo, Ohio; Brampton, Ontario; and Sterling Heights in suburban Detroit. About 200 jobs will be cut at the companyís Mack Avenue engine plant in Detroit. Around 5,000 workers will be cut due to the shift eliminations; other cuts will be made throughout the system.


All of the plants except the Toledo plant are covered by the contract, which promised $15 billion in investment at U.S. plants through 2011.


Several local union presidents and workers said UAW leaders should have been more forthcoming about the impending cuts before members ratified the deal.


"I just feel we got a bad deal out of all this,ď said Marvin Broner, 39, of Detroit, who for the past 11 years has worked on the motor line at the Jefferson North Assembly plant in Detroit. "I donít think our UAW president fought hard enough for us like he did for GM.ď


GM made more commitments for future work at U.S. plants in its contract, which was ratified by workers last month.


Chrysler said it will eliminate four products through 2008: the Dodge Magnum wagon, the convertible version of the Chrysler PT Cruiser, the Chrysler Pacifica crossover and the Chrysler Crossfire sports car.


In the same time frame, Chrysler plans to add two new products: the Dodge Journey crossover and Dodge Challenger sports car, along with two new hybrid models, the Chrysler Aspen and Dodge Durango.


"These actions reflect our new customer-driven philosophy and allow us to focus our resources on new, more profitable and appealing products,ď Jim Press, Chryslerís new vice chairman and president, said in a statement.



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